Joseph Rowntree Charitable Trust Case Study

Aligning investment decisions with targets of responsible investors

Who is the client?

The Joseph Rowntree Charitable Trust is an independent faith-based asset owner. It commits to investment in sustainable companies whose products or services meet the basic needs of people and protect the natural environment.

The Trust manages a portfolio worth £ 200m. As an investment principle, the Trust focuses on the long term: The asset owner engages with companies, both directly and through its fund managers to try to improve investees' practices. In this way, the investments are expected to increase their value and generate income over time.

What is the context?

As a responsible investor, the Trust aims to invest in sustainable companies. This includes companies that have a strategy in place to manage and reduce their greenhouse gas (GHG) emissions.

For the Trust there is a compelling economic argument to disinvest (or "divest") from companies that are either ignoring climate change, or are adopting a short-term view of it. Companies are increasingly held accountable for their environmental footprint due to tightened environmental regulations; failing to recognise such risk leads to losing company value, not only due to the effects of climate change, but also as a result of regulation. Future corporate leaders and today's responsible investors need to take steps to measure and mitigate their impact on global climate.

What was the challenge?

Understanding a company's climate impact is essential for making long-term investment decisions. Investors face the problem that data on companies' environmental performance are not readily available and comparable. To separate the climate- friendly from the not-so-climate-friendly, an investor needs to:

1. Rely on an investee's GHG inventory
2. Take an investee's climate strategy into account.

Although many GHG accounting standards such as the GHG Protocol or ISO 16064 are well established, only a few companies report their emissions in a standardised and comparable way, and even if they do, the data are often unreliable.

How did The Joseph Rowntree Charitable Trust proceed?

The Trust is an ongoing supporter of several initiatives that link investors to their climate impact, such as the CDP and Carbon Tracker. However, it was also keen to measure the climate impact of that part of its managed investments which it could most easily influence, its directly managed portfolio.

Therefore when it was offered a premium solution that gives a fully-transparent analysis based on a company-by-company assessment, and also a forward-looking examination of the individual investee's climate strategy, the Trust felt that this would greatly enhance its understanding of its portfolio.

What appealed to the Joseph Rowntree Charitable Trust about the Premium Climate Impact Assessment?

Given the need for transparency in the investees' climate impact, the Trust welcomed a solution which addresses both problems in data availability and quality, as well as in "point in time" footprints that do not take future developments of investees into account. With the Premium Climate Impact Assessment conducted with South Pole, which adhered to CDP standards, the Trust receives a comprehensive analysis of the climate impact of their investees which validates GHG emission data and closes the gap on non-reporting investees. The forward-looking approach also enables the Trust to understand the investees' climate strategy, taking into account climate policies, emissions targets, business risks and opportunities. Furthermore, the detailed assessment results allow the Trust to interact directly with its investees in discussing their GHG strategy and positioning in detail.

What were the advantages of the chosen solution?

The Premium Climate Impact Assessment provides full transparency in the investees' climate impact. This is essential for today's investment decisions. Firstly, it allows the Trust to evaluate an investee's risks in terms of climate impact – a key issue for the Trust's risk management. Secondly, the Trust is able to further align their decision process with their strategic target of being a responsible investor.